2 Small-Cap Grocery Stocks Rated Strong Buy

NASDAQ: IMKTA | Ingles Markets Inc. Cl A News, Ratings, and Charts

IMKTA – The COVID-19 pandemic has pushed consumers to buy essential products digitally. But because most mid- and large-cap grocery stocks are now trading at lofty valuations, we believe it would be wise to consider small-cap players like Ingles Markets (IMKTA) and Weis Markets (WMK) to benefit from the online shopping trend, which is expected to continue even in a post-pandemic environment.

Restrictions on restaurant patronage and strict social distancing measures have increased at-home food consumption and, thus, the demand for groceries. To capitalize on this trend, while many brick-and-mortar groceries retailers have focused on enhancing their online presence, many e-commerce giants ventured into groceries. Overall, companies that have been able to exploit opportunities to sell groceries have thrived amid the pandemic. The global food and grocery retail market size is expected to grow at a CAGR of 5% over the next seven years.

But many analysts are of the opinion that the stellar sales growth that online grocery channels have generated may not continue. They fear that many grocery retailers may witness only modest growth or even a decline in sales in the future with restaurant patronage returning to  pre-pandemic levels. So, many grocery stocks that are trading at high valuations could witness a retreat.

However, because the online shopping trend is expected to continue even after the pandemic is vanquished, we think fundamentally sound small-cap grocery stocks such as  Ingles Markets, Incorporated (IMKTA) and Weis Markets, Inc. (WMK) should gain significantly.

Click here to checkout our Retail Industry Report for 2021

Ingles Markets, Incorporated (IMKTA)

Headquartered in Asheville, IMKTA is a leading grocer that operates 197 supermarkets in six southeastern states. The company’s segments include retail grocery and other segments, which consist of fluid dairy operations and shopping center rentals. The company focuses on selling products to its customers through the delivery  of organic products, bakery departments and prepared foods, including delicatessen sections.

Last November, IMKTA partnered with the U.S. Department of Health and Human Services (HHS) to administer  COVID-19 vaccines through Ingles Markets Pharmacy.

IMKTA’s net sales have increased 10.4% year-over-year to $1.19 billion in the first quarter, ended December 26, 2020. Its gross profit has increased 22% from its  year-ago value to $314.19 million, while its income from operations has risen 98.7% to $76.44 million over the same period. Its EPS (Class A) has improved 203.33% year-over-year to $2.73 over the three-month period.

Analysts expect IMKTA’s EPS to grow at a CAGR of 14.5% over the next five years. The stock has gained 42.8% over the past six months and is currently trading at 0.24x its trailing-12-month sales, 83.9% lower than the industry average  1.47x.

IMKTA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.

IMKTA has a grade of A for Quality, Value and Growth, and a B for Stability. Of the 39 stocks in the A-rated Grocery/Big Box Retailers Industry, the stock is ranked #1.

In total, we rate IMKTA on eight different levels. Beyond what we’ve  stated above, we have also  given IMKTA grades for Momentum and Sentiment. Get all of IMKTA’s ratings here.

Weis Markets, Inc. (WMK)

WMK is a Mid Atlantic food retailer that operates 195 stores in Pennsylvania and surrounding states. The company’s retail food stores sell groceries, dairy products, frozen foods, pharmacy services, bakery products, alcoholic drinks, fuel and various other products, including general merchandise items, such as health and beauty care and household products.

WMK saw  increased ecommerce sales in the third quarter because of the remote working environment. The company met this demand with agile procurement, disciplined marketing and pricing programs, and accelerated replenishment schedules.

WMK’s revenues have increased 14.4% year-over-year to $1 billion in the third quarter ended September 26, 2020. Its income from operations has increased 144% from its  year-ago value to $42.81 million, while its net income has risen 118.8% to $31.34 million over the same period. Its EPS has improved 118.9% year-over-year to $1.16 over the 13-week period.

The stock has gained 13.9% year-to-date and is currently trading at 0.37x its trailing-12-month sales, 75.1% lower than the industry average  1.47x.

It’s no surprise that WMK has an overall rating of A, which translates to Strong Buy in our POWR Ratings system. WMK has a B grade  for Quality, Stability, Value and Growth. In the same industry, the stock is ranked #2.

Click here to see the additional POWR Ratings for WMK (Momentum and Sentiment).

Want More Great Investing Ideas?

“MUST OWN” Growth Stocks for 2021

How to Ride the 2021 Stock Market Bubble

5 WINNING Stocks Chart Patterns

K.I.S.S. for the March Stock Market

 


IMKTA shares were trading at $58.24 per share on Thursday morning, up $1.01 (+1.76%). Year-to-date, IMKTA has gained 37.05%, versus a 2.21% rise in the benchmark S&P 500 index during the same period.


About the Author: Rishab Dugar


Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
IMKTAGet RatingGet RatingGet Rating
WMKGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Updated 2024 Stock Market Outlook

The bull market continues to rage on with the S&P 500 (SPY) making new highs. That is the past...the question is what does the future hold? That is why 44 year investment veteran Steve Reitmeister provides this updated 2024 Stock Market Outlook to help you carve a path to outperformance the rest of the year. Read on below for the full story...

3 Energy Stocks Set to Soar Beyond Expectations

Given the geopolitical tensions, increasing global oil demand, and supply adjustments, the energy sector is poised for robust growth. Therefore, investors might consider investing in energy stocks TechnipFMC (FTI), Weatherford International (WFRD), and ChampionX (CHX), which are poised to exceed expectations. Keep reading…

Has Carnival (CCL) Stock Turned Into a Buy After Earnings Release?

Carnival Corporation (CCL) reported record revenue in its most recent quarter but still faces a negative bottom line. The collapse of Francis Scott Key Bridge brings more uncertainty to its financials. Given these events, what stance should one take with CCL stock? Read more to find out…

3 China Stocks Positioned for Long-Term Growth

Despite facing challenges, the Chinese economy has demonstrated resilience, as evidenced by recent robust industrial output and retail sales data. Given this outlook, it might be an opportune time to own three top-notch China stocks, JD.com, Inc. (JD), China Automotive Systems (CAAS), and Youdao, Inc. (DAO). Read on…

Investor Alert: “Buy the Rumor, Sell the News!”

Everyone knows that the Fed is going to cut rates at some point this year. That is the worst kept secret on the planet helping to explain how we keep making new highs for the for the S&P 500 (SPY). Unfortunately that creates an interesting predicament for stocks after rates are cut. Plus another hurdle in the 2024 Presidential election. Steve Reitmeister is here to share his insights on the market outlook along with a preview of his top 12 stocks to outperform. Read on for more...

Read More Stories

More Ingles Markets Inc. Cl A (IMKTA) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All IMKTA News